1. Source: U.S. Food Marketing System, 2002, ERS-USDA
EconS 451: Lecture #4
U.S. Food Retail
Be able to differentiate between different types of Food Retail outlets: Supermarket, Convenience Store, Superette, Supercenter, Warehouse Club.
Understand U.S. Food Retail sales trend and where growth has occurred.
Be able to explain what has happened to the number of Supermarkets in the U.S. relative to the amount of Supermarket floor space and the number of unique items per store.
Explain where concentration in this industry is occurring and whether consumers should be worried.
What have been the challenges to “On-Line Shopping”
Where has the U.S. Food Retail industry focused improving productivity while lowering operational costs?
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA

2. Source: U.S. Food Marketing System, 2002, ERS-USDA
Retail Definitions
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA

3. Distribution of U.S. Foodstore sales
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA

4. Source: U.S. Food Marketing System, 2002, ERS-USDA

5. Source: U.S. Food Marketing System, 2002, ERS-USDA

6. Number of Supermarkets and Sales
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA

7. Supermarket Definitions:
Source: U.S. Food Marketing System, 2002, ERS-USDA

8. Source: U.S. Food Marketing System, 2002, ERS-USDA
Loss of Market Share
Conventional supermarkets have lost significant market share to Supercenters and Warehouse clubs. Their strategy to compete is to:
Focus on natural foods
More pre-prepared foods
Promote store/private labels
Promote frequent shopper discounts
On-line home shopping
Self-Checkout
More personalized
Source: U.S. Food Marketing System, 2002, ERS-USDA

9. Challenges to On-Line Shopping
Meeting customers expectation on timely delivery
Access to delivery locale in all weather conditions
Spoilage for perishables like milk, ice cream, damaged fruit, etc.
Inflated delivery costs in low/density areas.
Primary reasons why success has been in high-density cities.
Source: U.S. Food Marketing System, 2002, ERS-USDA

10. Retail Mergers / Divestures
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA

11. Concentration in Food Retail
National Concentration has increased substantially, local market concentration has only increased slightly due to anti-trust oversight and monitoring.
Between C4 ratio of national grocery retailers increased 68.6% while the C4 ratio among the largest 100 cities increased 5.4%.
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA

12. Sales of Top Grocery Wholesalers
Source: U.S. Food Marketing System, 2002, ERS-USDA
Food Retail World - Leading Retailers
Source: U.S. Food Marketing System, 2002, ERS-USDA

13. Productivity and Average Hourly Earnings
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA

14. Foreign Owned Food Retailers
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA

15. Source: U.S. Food Marketing System, 2002, ERS-USDA
Summary!
Retail food sales growth has been slow due to slow population growth and growth of fast-food sales.
The number of supermarkets has declined while average floor space has increased, understand the benefits associated with this market shift.
Nontraditional supermarkets have focused on all natural specialty products (Wild Oats, Whole Foods, Trader Joes).
Implications for industry concentration related to upstream purchasing power relative to ability to increase price to consumers.
Understand food retail employment productivity changes relative to average earnings per employee.
Foreign investment in U.S. Food Retail still relatively small, but investment of U.S. Food Retail from abroad is growing.
Source: U.S. Food Marketing System, 2002, ERS-USDA
Source: U.S. Food Marketing System, 2002, ERS-USDA